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Income Taxes
 6 Months Ended
Jun. 28, 2025
Income Taxes  
Income Taxes

Note L - Income Taxes

 

The Company files income tax returns in the U.S. at the federal and state levels, and in foreign jurisdictions. With limited exceptions, the Company is no longer subject to U.S. federal, state, and local income tax examinations by tax authorities for years before 2020 and is no longer subject to non-U.S. income tax examinations by foreign tax authorities for years prior to 2018.

The total amount of unrecognized tax benefits could increase or decrease within the next 12 months for several reasons, including the closure of federal, state, and foreign tax years by expiration of the statute of limitations and the recognition and measurement considerations under FASB ASC Topic 740, “Income Taxes.”  There have been no significant changes to the value of unrecognized tax benefits during the six months ended June 28, 2025. 

 

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (“OBBBA”), which resulted in many tax extensions and other rule changes, including the following which we believe will have an effect on our tax provision in 2025 or 2026:

 

 

1.

Full expensing of U.S. research and development costs under Section 174A of the Internal Revenue Code;

 

2.

Retroactive expensing of unamortized U.S. research and development costs capitalized between 2022 and 2024; either all in 2025, or over two years in 2025 and 2026;

 

3.

Return of the Section 163(j) taxable income base excluding the deductions for depreciation and amortization in 2025 (change from “Tax EBIT” to “Tax EBITDA”);

 

4.

Decrease in the Section 250 deduction for Net CFC Tested Income (formerly GILTI) to 40% (from 50%) in 2026, instead of the scheduled decrease to 37.5% prior to the OBBBA;

 

5.

Decrease in the Section 250 deduction for foreign-derived income to 33.34% (from 37.5%) in 2026, instead of the scheduled decrease to 21.875% prior to the OBBBA; and.

 

6.

Increase in the foreign tax credit rate on Net CFC Tested Income (formerly GILTI) to 90% (from 80%), and a 10% disallowance on repatriation, in 2026.

 

The Company is currently evaluating the effect of the OBBBA on its future interim and annual financial statements. The Company’s deferred tax asset for U.S. research and development costs may reverse in subsequent financial statements, decreasing tax payable for a similar amount or increasing other tax attributes; and this research deduction may have an effect on the Section 163(j) limitation.  The Company is unable at this time to estimate the full impact of the OBBBA on its future interim and annual financial statements due to the complexity of the changes in the OBBBA and uncertainty regarding the effect of anticipated guidance from the U.S. Department of the Treasury.